Eat People

1. If It Doesn’t Scale, It Will Get Stale

Scale makes all the difference.

Find things that get cheaper. True wealth creation comes from products or services that get cheaper year after year, enabling new applications and reaching millions or billions of users. This is the essence of "Scale." As costs plummet, demand rises dramatically, creating massive markets and wealth for those who drive the cost reduction.

Elasticity drives growth. This phenomenon, known as elasticity or the learning curve, means that as the price per unit drops, the number of units sold more than doubles, leading to exponential growth. Examples throughout history demonstrate this principle:

• Intel's microprocessors: Cost per bit dropped billion-fold, enabling PCs, smartphones, etc.
• Rockefeller's oil: Lowered kerosene cost, opening up lighting market.
• Carnegie's steel: Cheaper steel rails enabled heavier trains, transforming transport.
• Wal-Mart's retail: Used technology to lower costs, democratizing goods.

Look for declining costs. Free Radicals identify opportunities where costs can continuously decrease over time, not just a one-off reduction. If lowering the price next year would significantly increase demand or enable new uses, it has the potential to Scale. Avoid businesses where prices only go up or demand is inelastic.

2. Waste What’s Abundant to Make Up for What’s Scarce

Waste away what’s abundant to make up for what’s scarce.

Leverage canonical abundance. Every economic era is defined by a resource that becomes incredibly abundant and cheap (wood, coal, oil, silicon, bandwidth). The key to wealth creation is to identify this abundance and "waste" it prodigally to overcome existing scarcities, particularly the scarcity of human time and ingenuity.

Waste is virtuous. Counterintuitively, wasting the cheap resource is the path to productivity. We waste energy to refine silicon into chips or crude oil into targeted fuels, making them more useful and ultimately cheaper for the functionality they deliver. This process drives industrial revolutions and forces businesses to adapt.

Find the new abundance. Today's abundant resources include bandwidth, computation, and data. The scarce resources are human time, attention, and ingenuity. Free Radicals find ways to use the abundant (cheap) resources to compensate for the scarce (expensive) ones, creating new products and services that save people time or augment their capabilities.

3. When in Doubt, Get Horizontal

Getting horizontal is how a Free Radical takes those entrenched, vertically integrated giants out at the knees.

Attack vertical monopolies. Old-line, vertically integrated companies (like old IBM, AT&T, or even modern media companies) control every step of their business, from manufacturing to sales. This structure becomes inefficient as technology proliferates and markets scale, leading to internal politics, inflated transfer prices, and slow innovation.

Embrace horizontal layers. The modern, efficient structure is horizontal, composed of discrete layers of specialized intellectual property or services. Companies focus on doing one thing exceptionally well within their layer (e.g., Intel makes processors, Microsoft writes operating systems, HP assembles PCs). This allows each layer to innovate at its own pace.

Enter markets sideways. Owning a crucial horizontal sliver is the easiest way to enter a market and Scale. Instead of building factories or huge sales forces, you license your intellectual property or provide a specialized service that fits into the existing horizontal stack. This allows you to leverage others' infrastructure and reach a wider market faster.

4. Intelligence Moves Out to the Edge of the Network

The trend of intelligence at the edge is unstoppable.

Shift from dumb networks. Historically, networks (phone, TV) had intelligence concentrated in the center (switches, transmitters) and dumb devices at the edge (phones, TVs). The Internet, however, is a relatively dumb network, allowing intelligence to proliferate at the edge.

Empower edge devices. With cheap, powerful processors and ubiquitous connectivity, intelligence resides in user devices (computers, phones) and distributed servers ("the cloud"), not the network infrastructure itself. This enables rapid innovation in applications and services without needing permission from network operators.

Leverage human intelligence. The "edge" also includes the users themselves. Platforms like Google and Facebook succeed by creating sandboxes where users generate content and data, which the platform then organizes or leverages. This harnesses collective intelligence and activity at the edge, creating value that couldn't be generated centrally.

5. Wealth Comes from Productivity; Everything Else Is Gravy

Increased productivity = better living.

Productivity drives wealth. Real wealth is created by increasing output per worker hour. This can be achieved through specialization, better tools (capital stock), or innovative processes. Productivity gains lead to a higher standard of living for society as a whole, not just the individuals who become rich.

Distinguish productivity from efficiency. Efficiency is doing things right (using fewer inputs), often a sign of a mature or declining cycle. Productivity is doing the right things right (increasing valuable output), which is the source of new wealth. Focusing solely on efficiency in a non-productive area doesn't create wealth.

Identify jobs to "eat". To increase societal productivity, jobs that are unproductive or can be done more efficiently by technology must be eliminated or transformed. This sounds harsh ("Eat People"), but it frees up human capital for higher-value, more productive work, ultimately raising everyone's living standards.

6. Adapt to Humans; Don’t Make Them Adapt to You

Free Radicals instead need to make technology that adapts to humans.

Technology should serve humans. Historically, humans often had to adapt to the limitations and interfaces of new technology (driving cars, using command-line interfaces). As technology becomes more powerful and cheaper, its capability should be used to make the technology adapt to natural human behavior and thought processes.

Hide the complexity. Successful technologies hide their underlying complexity from the user, making them intuitive and easy to use (e.g., iPods, smartphones). The next wave of productivity will come from technologies that adapt to how we think, speak, move, and interact.

Harness adaptive technology. The future lies in machines that adapt to individual users, predicting needs, personalizing experiences, and augmenting human capabilities. This requires leveraging data, AI, and intelligence at the edge to create systems that understand and respond to human behavior, driving unprecedented productivity gains.

7. Be Soylent—Eat People

The best way to leverage Abundance and Scale and to create Productivity is to get rid of people.

Eliminate unproductive jobs. Wealth creation requires increasing output per worker hour. This means identifying and eliminating jobs that are redundant, inefficient, or can be automated by technology. While disruptive, this process is essential for progress and frees up labor for higher-value activities.

Target Servers and Sloppers. The most obvious targets for "eating" are Servers (those providing services without creating new productivity) and Sloppers (middlemen who move things around without adding significant value). Technology can automate many of these tasks, from data entry to logistics.

Beware of Sponges and Thieves. Some jobs are artificially protected or overcompensated through licensing, unions, or government mandates (Sponges and Thieves). These roles extract wealth without creating it. Technology and market forces can eventually disrupt these protected franchises, increasing overall societal wealth by lowering costs.

8. Markets Make Better Decisions Than Managers

Markets make better decisions than people.

Markets allocate capital ruthlessly. The stock market, despite its volatility, is a powerful mechanism for allocating capital. It mercilessly directs investment towards companies with the best prospects for future profits (productivity) and starves those that are inefficient or unproductive.

Price discovery is key. Markets excel at price discovery, aggregating information and opinions from many participants to determine the true value of assets, goods, or services. This collective intelligence is generally more accurate and less biased than decisions made by individual managers.

Apply market mechanisms internally. Free Radicals can use market principles within their own businesses or services to improve decision-making and resource allocation. Creating internal markets or using price signals based on supply and demand can lead to more efficient operations than top-down managerial decrees.

9. Embrace Exceptionalism

So simple—Embrace Exceptionalism.

Not everyone is equal in ability. While equal opportunity is essential, the idea that everyone has equal ability is false and hinders progress. A small percentage of highly intelligent and creative individuals ("The Vital Few") are disproportionately responsible for driving innovation and creating new wealth.

Identify and leverage talent. Success comes from identifying exceptional individuals and either being one yourself, working with them, or investing in their ventures. These are the people with the capacity for deep comprehension and original thought needed to solve complex problems and invent the future.

Colleges act as gatekeepers. Due to legal restrictions on corporate aptitude testing, colleges have become de facto screeners for employers, using metrics like SAT scores and grades to identify potential talent. While imperfect, this system highlights the societal need to identify and cultivate exceptional ability.

10. Be a Market Entrepreneur and Attack Political Entrepreneurs

A market entrepreneur succeeds financially by selling a newer, better, or less expensive product on the free market without any government subsidies, direct or indirect.

Market entrepreneurs create value. True entrepreneurs ("market entrepreneurs") create wealth by innovating, increasing productivity, and offering better or cheaper products and services in a competitive market. They earn profits by providing value that customers willingly pay for.

Political entrepreneurs extract value. "Political entrepreneurs" gain wealth and power not through market competition but by leveraging government influence, subsidies, or protected monopolies (licenses, franchises). They extract wealth by charging inflated prices for services that lack competition, effectively taxing the public.

Attack protected franchises. Political entrepreneurs create price umbrellas that overvalue their services due to lack of competition. Market entrepreneurs should identify these areas and use innovation, technology, and lower costs to disrupt these protected markets, ultimately benefiting consumers and creating real wealth.

11. Use Zero Marginal Cost to Create a Flood (or Someone Else Will)

If you can do something with zero margin cost, do it.

Digitization drives costs to zero. Once information or content is digitized, the cost of creating and distributing additional copies approaches zero. This "zero marginal cost" fundamentally changes business models, making it difficult to charge per copy.

Give it away and build around it. Products or services with zero marginal cost will inevitably be given away for free or near-free. Companies must adapt by finding ways to monetize something else upstream or downstream from the free product, such as advertising, related services, or hardware.

Piracy is inevitable. For digital content, piracy is a zero marginal cost competitor that cannot be stopped by legal means alone. Content creators and distributors must develop new business models (e.g., streaming, subscriptions, experiences) that offer value beyond simple copying, leveraging technology that pirates cannot easily replicate.

12. Create Your Own Scarcity with a Virtual Pipe

Media is about control of a pipe.

Old media controlled physical pipes. Traditional media empires were built on controlling physical distribution channels or government-granted licenses (TV spectrum, cable lines, newspaper delivery routes). This control created artificial scarcity, allowing them to charge premiums for content and advertising.

The Internet lacks physical pipes. The Internet is a packet-switched network without inherent end-to-end pipes, disrupting traditional media models. Content can flow freely, making it difficult to control distribution and enforce scarcity.

Build virtual pipes. New media success comes from creating "virtual pipes" – closed systems or platforms that keep users engaged and within a controlled environment. This can be achieved through network effects (social networks), integrated hardware/software ecosystems (Apple iTunes/iPod), or addictive experiences (online gaming), allowing for monetization despite the open nature of the underlying network.

Last updated: May 6, 2025